Former Securities and Exchange Board of India (SEBI) chief Ajay Tyagi has stressed on the need for developing a low- and medium-rated corporate bond market. The move that will help more number of issuers across the rating spectrum to tap into it as an alternative to bank financing. Apart from the bond market, he focused on two broad areas — use of technology and ESG investing, which is no longer just a fad or a buzzword.
Although he said the corporate bond market has grown in recent years, its success has remained limited to higher rated papers. As of now, 95 per cent of issuance is concentrated in top 3 rating categories — AAA, AA+ and AA. Similarly, 97 per cent of trading is in these top three rating categories.
For the development of the bond market, he suggested that the government and regulators should immediately implement measures like backstop facility for purchase of debt securities, credit enhancement mechanism and setting up a Development Financial Institution (DFI) for debt financing of infrastructure. He stated these measures, which have been in the pipeline for quite some time, need to be implemented by the government and regulators without further delay. He also advocated for unifying the regulatory regime for government securities (G-Secs) and corporate bonds — both for issuance and trading.